Preliminary announcement of December 2016 half year results

Appendix 1 (Rule 10.4)
Preliminary Half Year Report
Reporting period
Previous reporting period
Revenue from ordinary activities
Profit from ordinary activities after tax
attributable to security holders
Net profit attributable to security holders
Interim dividend
Record date
Dividend payment date
Comments
Not applicable
Refer to the Cavalier Corporation Ltd Half Year Report attached
Six months to 31 December 2016
Six months to 31 December 2015
Amount per securityImputed amount per security
84,278Down 14%
-1,876
Not applicable
PRELIMINARY HALF YEAR RESULTS ANNOUNCEMENT
Results for announcement to the market
CAVALIER CORPORATION LIMITED AND SUBSIDIARIES
Not applicable
Not applicable
31Down 99%
Amount NZ$000'sPercentage change
1

---

1

7 Grayson Avenue, Papatoetoe, PO Box 97040, Manukau City, Manukau 2241, New Zealand
Phone 64-9-277 6000 Fax 64-9-279 4756

17 February 2017

Directors’ Report
For the six months ended 31 December 2016

The half-year results reported today are in line with what the Directors expected when they recently announced that
the normalised profit after tax for the 2016/17 year is forecast to be close to break-even.

FINANCIAL PERFORMANCE



1
Normalised is a non-GAAP (Generally Accepted Accounting Practice) measure that provides what the Directors believe to be a more
meaningful view of the underlying financial performance of the Group. A reconciliation between GAAP and normalised earnings together with
further commentary on the disclosure of non-GAAP financial information are attached.

Last year’s focus was debt reduction, inventory rationalisation and the restructuring of administration and sales
functions. Our focus in recent months has been significant investment in the core business by consolidating
manufacturing activities and re-invigorating the Cavalier Bremworth brand.

The short term cost of these essential reinvestment activities has impacted the current half year results, however
they will progressively and significantly benefit the Company going forward. Other market factors such as increased
wool price and the stronger USD have also adversely impacted the first half results.

The Group reports a break-even position for the half year (compared with $3.5m in 2015/16). Adjusting for the
abnormal gain from the scour merger of $3.7m and transitional costs relating to the consolidation of Cavalier’s wool
spinning operation of $1.8m, the normalised loss for the first six months is $1.9m compared with a normalised gain
of $2.4m last financial year.


Six months ended 31 December20162015
Unaudited$000s$000s
Revenue$84,278$98,422
EBIT (Normalised)
1
(1,183)4,268
Net interest expense(1,489)(1,961)
Share of equity-accounted investee profit (Normalised after tax)
1
88985
Profit/(Loss) before tax (Normalised)
1
(2,584)3,292
Income tax708(876)
Profit/(Loss) after tax (Normalised)
1
(1,876)2,416
Restructuring costs(1,833)(936)
Net gain on merger of equity-accounted investee3,7400
Gain on disposal of property, plant and equipment02,035
Profit after tax (GAAP)$31$3,515
Earnings per share (cents) (Normalised)
1
(2.7)3.5
Earnings per share (cents) (GAAP)0.05.1

2

FINANCIAL POSITION

The increase in net bank debt of $5.9m since the year-end reflects $6.0m of restructuring costs and $2.1m capital
gains tax payment resulting from the sale of the Sydney warehouse in the last financial year. With these large one-
off costs now behind us, debt will once again start to fall. In January, the Company received a dividend of $3.25m
from Cavalier Wool Holdings Ltd (CWH) as a result of the scour merger, which has reduced debt.

In the last six months, management has improved the Company’s inventory profile and reduced inventory by
$8.5m. This has been achieved while it was also manufacturing the additional inventory required to support new
products in the market.

Total assets and equity have remained in line with previous year-end.


CASH FLOWS

Net cash outflows from operations were $4.8m for the first six months, reflecting the large costs associated with the
consolidation of manufacturing and the capital gains tax payment referred to above.


SEGMENT REVIEWS

Carpet Business

The sale of the Ontera carpet tile business in 2015/16 and the associated carpet tile revenue forgone is the main
driver of the fall in revenue.

The NZ market has remained reasonably buoyant, however Australia has been much softer than anticipated
particularly in the last two months. We are working hard with our retailers to stimulate sales.

We have now closed our Christchurch plant and moved the felting operation to Wanganui. Woollen yarn spinning is
now conducted entirely out of the Napier plant. We acknowledge the management and staff of these operations for
making this happen.

The carpet segment result for the first six months has been affected by a number of factors including:

• Significant restructuring costs associated with the consolidation of spinning operations;
• Higher wool price compared with the previous year;
• Higher USD impacting negatively on cost of synthetic yarn purchases; and
• Increased marketing costs in respect of the new Cavalier Bremworth World of Difference marketing
campaign.

All of the above factors that have negatively impacted the six months (and the full year forecast) will either not
repeat or have turned in our favour, with the benefits to come through in 2017/18.The significant gains from
consolidating our manufacturing operations will also be progressively realised in the 2017/18 year.

Because there is about a six month lag between the purchase of wool and the manufacture and sale of carpet, we
will not see the benefit from the current drop in wool price until 2017/18. Conversely, the high wool price that
prevailed in the previous year is adversely impacting current profitability.

Wool Business

Our wool business comprises our wool buying operation, Elco Direct, and a 27.5% interest in the enlarged CWH
wool scouring business post its merger with the wool scouring operations of New Zealand Wool Services
International Ltd (NZWSI). This is to be compared with the 50% we held previously in a smaller pre-merger entity.

This year, both our wool-related businesses have been adversely impacted by the dramatic drop in wool price
which has caught many in the industry by surprise and is due almost entirely to a lack of demand out of China.

3

Elco Direct, like many wool traders and exporters, had to exit stocks in a falling market and this impacted
negatively on margins. The current price of wool is very low and growers are reluctant to sell at these levels. As a
result, the flow of wool has abated significantly, with a high percentage of wool passed in at auction. Elco Direct
has had three very strong years, but profits are down in the last six months reflecting the current challenging
operating environment. Once demand returns and wool price stabilises, Elco Direct will be in a better position to
buy and sell wool at a consistent margin.

After over two years of Court proceedings, the merger of CWH with the wool scouring operations of NZWSI was
finally approved by the Court of Appeal in December. The purpose of the merger is to safeguard the wool scouring
industry in New Zealand and our reduced share in a much bigger entity will be beneficial for the Company in the
long term.

For the first six months, volume through the scour is considerably down on that for the same period last year. The
total wool clip has not changed dramatically, but at current low prices, growers and exporters are holding off
committing to selling and scouring wool. We are confident that the wool will eventually come on to market and be
scoured once pricing and demand settle at their new levels.

The consolidation of the scouring businesses is expected to take a year to complete. In the short term, CWH will
experience some inefficiencies while equipment is being moved and reconfigured.


EARNINGS OUTLOOK

The Directors reiterate that their forecast for 2016/17 remains unchanged. We expect the result for 2016/17 to be
close to breakeven on a normalised tax-paid basis.

2016/17 is a year of investment in the long term future of the Company, and we remain confident that the benefits
of the work done this year together with changes in the macro environment will flow through into improved results.


DIVIDENDS

The Directors have previously advised that as soon as we are in a position to confirm an ongoing improvement in
underlying performance and we have our debt firmly under control, we will resume dividend payments. While good
progress has been made, we are not there yet. The NZD:AUD exchange rate and the weakness in the Australian
economy remain a concern to Cavalier as an exporter. As a consequence, no dividend is being paid at this time.







S E F Haydon S R Bootten
Chairman Director






For more information regarding this announcement, please contact Paul Alston, Chief Executive Officer, on 021
918 033 or 09 277 1135.

4

Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information
For the six months ended 31 December 2016


The half year report for the six months ended 31 December 2016 contains financial information that is non-GAAP
(Generally Accepted Accounting Practice) and therefore falls within the Financial Markets Authority’s guidance note
on “Disclosing non-GAAP financial information” issued in September 2012.

Non-GAAP financial information has been prepared using the unaudited GAAP-compliant half year and audited
GAAP-compliant full year financial statements of the Group.

Non-GAAP financial information contained within the half year report (more particularly, the non-GAAP measures
of financial performance such as “EBITDA (normalised)”, “EBIT (normalised)”, “Profit before tax (normalised)” and
“Profit after tax (normalised)” provide useful information to investors regarding the performance of the Group
because the calculations exclude restructuring costs and other gains/losses (for example, gain on sale of property)
that are not expected to occur on a regular basis either by virtue of quantum or nature.

In arriving at this view, the Directors have also taken cognisance of the regular requests by users of the Group
financial statements, including analysts and shareholders, regarding the nature and quantum of significant items
within the GAAP-compliant results and the way analysts distinguish between GAAP and non-GAAP measures of
profit.

The disclosure of the non-GAAP financial information is also consistent with how the financial information for the
Group is reported internally, and reviewed by the Chief Executive Officer as its chief operating decision maker, and
provides what the Directors and management believe gives a more meaningful insight into the underlying financial
performance of the Group and a better understanding of how the Group is tracking after taking into account these
significant items.

In putting together the half year report, the Directors have taken into account all of the requirements within the
guidance note. More specifically, these include:

 outlining why non-GAAP financial information is useful;
 ensuring that:
- no undue prominence, emphasis or authority is given to any non-GAAP financial information;
- non-GAAP financial information is appropriately labelled;
- the calculation of non-GAAP financial information is clearly explained; and
- a reconciliation between non-GAAP and GAAP financial information is provided (see below);
 applying a consistent approach from period to period and ensuring that comparatives are similarly adjusted
for consistency;
 ensuring that non-GAAP financial information is unbiased and taking care when describing, or referring to,
items as ‘one-off’ or ‘non-recurring’; and
 identifying the source of non-GAAP financial information

5
Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information (continued)


Reconciliation of GAAP-compliant to non GAAP-compliant measures of profit/(loss) after tax

Six months ended 31 Dec 2016

GAAP Adjustments Normalised
$000 $000 $000

Revenue $84,278 - $84,278

EBITDA (2,049) 2,546
1
497

Depreciation (1,680) - (1,680)

EBIT

(3,729) 2,546 (1,183)

Net interest expense (1,489) - (1,489)

Share of profit after tax of equity-accounted investee 65 23

88
Gain on merger and dilution of equity-accounted investee 3,763 (3,763)

-

Loss before tax (1,390) (1,194) (2,584)

Tax credit 1,421 (713)
2
708

Profit/(Loss) after tax $31 (1,907) (1,876)

Abnormal net gains after tax 1,907 1,907

Profit after tax (GAAP) - $31

Analysis of reversals

Loss before
tax
Tax effect Loss after
tax
$000 $000 $000
Restructuring costs
1, 2
$(2,546) $713 $(1,833)

---

CAVALIER CORPORATION LIMITED


HALF YEAR REPORT

for the six months ended 31 December 2016

TABLE OF CONTENTS

Half Year Report



Financial Summary 1

Directors’ Report 2

Independent Review Report 5

Condensed Consolidated Income Statement 6

Condensed Consolidated Statement of Comprehensive Income 7

Condensed Consolidated Statement of Changes in Equity 8

Condensed Consolidated Statement of Financial Position 10

Condensed Consolidated Statement of Cash Flows 11

Notes to the Financial Statements 13

Disclosure of Non-GAAP Financial Information 18

Corporate Directory 20

1

Cavalier Corporation Limited and subsidiary companies

Financial Summary - for the six months ended 31 December 2016 (Unaudited)


Unaudited
Six months
ended
31 Dec 2016
Unaudited
Six months
ended
31 Dec 2015
Audited
Year
ended
30 June 2016
$000 $000 $000

Revenue $84,278 $98,422 $190,371

EBITDA (normalised)
1
497 6,093 12,275

Depreciation (1,680) (1,825) (3,352)

EBIT (normalised)
1
(1,183) 4,268 8,923

Net interest expense (1,489) (1,961) (3,374)

Share of profit after tax of equity-accounted investee
(normalised)
1


88

985

2,670

Profit/(loss) before tax (normalised)
1
(2,584) 3,292 8,219

Tax (expense)/credit 708 (876) (1,906)

Profit/(Loss) after tax (normalised)
1
(1,876) 2,416 6,313

Abnormal net gains/(losses) after tax
1
1,907 1,099 (3,198)

Profit after tax (GAAP) $31 $3,515 $3,115

Net cash flow from operating activities $(4,789) $5,661 $1,904

Basic and diluted earnings per share (cents) –
based on weighted average number of shar
es
outstanding of 68,679,098

Normalised
1
(2.7) 3.5 9.2
GAAP - 5.1 4.5

Return on average shareholders’ equity (%)
Normalised
1
(2.7) 3.5% 9.3%
GAAP - 5.2% 4.6%

Unaudited
As at
31 Dec 2016
Unaudited
As at
31 Dec 2015
Audited
As at
30 June 2016

Net tangible asset backing per share ($) $0.95 $0.97 $0.92


Equity to total assets (%) 49.5% 49.1% 47.1%


Net interest-bearing debt to equity ratio 38:62 32:68 34:66








1
Normalised is a non-GAAP (Generally Accepted Accounting Practice) measure that provides what the Directors believe to be a more
meaningful view of the underlying financial performance of the Group. A reconciliation between GAAP and normalised earnings together with
further commentary on the disclosure of non-GAAP financial information are set out at pages 18 and 19 of the half year report
.

2
Cavalier Corporation Limited and subsidiary companies

Directors’ Report
For the six months ended 31 December 2016


The Directors of Cavalier Corporation present their report, including financial statements, for the period to 31
December 2016.

FINANCIAL PERFORMANCE



1
Normalised is a non-GAAP (Generally Accepted Accounting Practice) measure that provides what the Directors believe to be a more
meaningful view of the underlying financial performance of the Group. A reconciliation between GAAP and normalised earnings together with
further commentary on the disclosure of non-GAAP financial information are set out at pages 18 and 19 of the half year report
.

Last year’s focus was debt reduction, inventory rationalisation and the restructuring of administration and sales
functions. Our focus in recent months has been significant investment in the core business by consolidating
manufacturing activities and re-invigorating the Cavalier Bremworth brand.

The short term cost of these essential reinvestment activities has impacted the current half year results, however
they will progressively and significantly benefit the Company going forward. Other market factors such as increased
wool price and the stronger USD have also adversely impacted the first half results.

The Group reports a break-even position for the half year (compared with $3.5m in 2015/16). Adjusting for the
abnormal gain from the scour merger of $3.7m and transitional costs relating to the consolidation of Cavalier’s wool
spinning operation of $1.8m, the normalised loss for the first six months is $1.9m compared with a normalised gain
of $2.4m last financial year.


FINANCIAL POSITION

The increase in net bank debt of $5.9m since the year-end reflects $6.0m of restructuring costs and $2.1m capital
gains tax payment resulting from the sale of the Sydney warehouse in the last financial year. With these large one-
off costs now behind us, debt will once again start to fall. In January, the Company received a dividend of $3.25m
from Cavalier Wool Holdings Ltd (CWH) as a result of the scour merger, which has reduced debt.

In the last six months, management has improved the Company’s inventory profile and reduced inventory by
$8.5m. This has been achieved while it was also manufacturing the additional inventory required to support new
products in the market.

Total assets and equity have remained in line with previous year-end.

Six months ended 31 December20162015
Unaudited$000s$000s
Revenue$84,278$98,422
EBIT (Normalised)
1
(1,183)4,268
Net interest expense(1,489)(1,961)
Share of equity-accounted investee profit (Normalised after tax)
1
88985
Profit/(Loss) before tax (Normalised)
1
(2,584)3,292
Income tax708(876)
Profit/(loss) after tax (Normalised)
1
(1,876)2,416
Restructuring costs(1,833)(936)
Net gain on merger of equity-accounted investee
3,7400
Gain on disposal of property, plant and equipment
02,035
Profit after tax (GAAP)
$31$3,515
Earnings per share (cents) (Normalised)
1
(2.7)3.5
Earnings per share (cents) (GAAP)0.05.1

3
Cavalier Corporation Limited and subsidiary companies

Directors’ Report (continued)


CASH FLOWS

Net cash outflows from operations were $4.8m for the first six months, reflecting the large costs associated with the
consolidation of manufacturing and the capital gains tax payment referred to above.


SEGMENT REVIEWS

Carpet Business

The sale of the Ontera carpet tile business in 2015/16 and the associated carpet tile revenue forgone is the main
driver of the fall in revenue.

The NZ market has remained reasonably buoyant, however Australia has been much softer than anticipated
particularly in the last two months. We are working hard with our retailers to stimulate sales.

We have now closed our Christchurch plant and moved the felting operation to Wanganui. Woollen yarn spinning is
now conducted entirely out of the Napier plant. We acknowledge the management and staff of these operations for
making this happen.

The carpet segment result for the first six months has been affected by a number of factors including:

• Significant restructuring costs associated with the consolidation of spinning operations;
• Higher wool price compared with the previous year;
• Higher USD impacting negatively on cost of synthetic yarn purchases; and
• Increased marketing costs in respect of the new Cavalier Bremworth World of Difference marketing
campaign.

All of the above factors that have negatively impacted the six months (and the full year forecast) will either not
repeat or have turned in our favour, with the benefits to come through in 2017/18.The significant gains from
consolidating our manufacturing operations will also be progressively realised in the 2017/18 year.

Because there is about a six month lag between the purchase of wool and the manufacture and sale of carpet, we
will not see the benefit from the current drop in wool price until 2017/18. Conversely, the high wool price that
prevailed in the previous year is adversely impacting current profitability.

Wool Business

Our wool business comprises our wool buying operation, Elco Direct, and a 27.5% interest in the enlarged CWH
wool scouring business post its merger with the wool scouring operations of New Zealand Wool Services
International Ltd (NZWSI). This is to be compared with the 50% we held previously in a smaller pre-merger entity.

This year, both our wool-related businesses have been adversely impacted by the dramatic drop in wool price
which has caught many in the industry by surprise and is due almost entirely to a lack of demand out of China.

Elco Direct, like many wool traders and exporters, had to exit stocks in a falling market and this impacted
negatively on margins. The current price of wool is very low and growers are reluctant to sell at these levels. As a
result, the flow of wool has abated significantly, with a high percentage of wool passed in at auction. Elco Direct
has had three very strong years, but profits are down in the last six months reflecting the current challenging
operating environment. Once demand returns and wool price stabilises, Elco Direct will be in a better position to
buy and sell wool at a consistent margin.

After over two years of Court proceedings, the merger of CWH with the wool scouring operations of NZWSI was
finally approved by the Court of Appeal in December. The purpose of the merger is to safeguard the wool scouring
industry in New Zealand and our reduced share in a much bigger entity will be beneficial for the Company in the
long term.

4

Cavalier Corporation Limited and subsidiary companies

Directors’ Report (continued)


For the first six months, volume through the scour is considerably down on that for the same period last year. The
total wool clip has not changed dramatically, but at current low prices, growers and exporters are holding off
committing to selling and scouring wool. We are confident that the wool will eventually come on to market and be
scoured once pricing and demand settle at their new levels.

The consolidation of the scouring businesses is expected to take a year to complete. In the short term, CWH will
experience some inefficiencies while equipment is being moved and reconfigured.


EARNINGS OUTLOOK

The Directors reiterate that their forecast for 2016/17 remains unchanged. We expect the result for 2016/17 to be
close to breakeven on a normalised tax-paid basis.

2016/17 is a year of investment in the long term future of the Company, and we remain confident that the benefits
of the work done this year together with changes in the macro environment will flow through into improved results.


DIVIDENDS

The Directors have previously advised that as soon as we are in a position to confirm an ongoing improvement in
underlying performance and we have our debt firmly under control, we will resume dividend payments. While good
progress has been made, we are not there yet. The NZD:AUD exchange rate and the weakness in the Australian
economy remain a concern to Cavalier as an exporter. As a consequence, no dividend is being paid at this time.












S E F Haydon S R Bootten
Chairman Director



16 February 2017

5

Independent review report
To the shareholders of Cavalier Corporation Limited
We have completed a review of the condensed consolidated interim financial statements of Cavalier Corporation
Limited and its subsidiaries (“Group”) on pages 6 to 17 which comprise the consolidated statement of financial
position as at 31 December 2016, and the consolidated statement of comprehensive income, statement of changes
in equity and statement of cash flows for the six months ended on that date, and a summary of significant
accounting policies and other explanatory information.
This report is made solely to the shareholders of Cavalier Corporation Limited as a body. Our review work has been
undertaken so that we might state to the Group’s shareholders those matters we are required to state to them in
the independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Group’s shareholders as a body, for our review work, this report
or any of the conclusions we have formed.
Directors’ responsibilities
The Directors of Cavalier Corporation Limited are responsible for the preparation and fair presentation of the
condensed consolidated interim financial statements in accordance with NZ IAS 34 Interim Financial Reporting and
for such internal control as the Directors determine is necessary to enable the preparation and fair presentation of
the condensed consolidated interim financial statements that are free from material misstatement, whether due to
fraud or error.
Our responsibilities
Our responsibility is to express a conclusion on the condensed consolidated interim financial statements based on
our review. We conducted our review in accordance with NZ SRE 2410 Review of Financial Statements Performed
by the Independent Auditor of the Entity. NZ SRE 2410 requires us to conclude whether anything has come to our
attention that causes us to believe that the financial statements are not prepared, in all material respects, in
accordance with NZ IAS 34 Interim Financial Reporting. As the auditor of Cavalier Corporation Limited, NZ SRE
2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial statements.
A review of the condensed consolidated interim financial statements in accordance with NZ SRE 2410 is a limited
assurance engagement. The auditor performs procedures, primarily consisting of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with International Standards on Auditing (New Zealand). Accordingly we do not express an audit opinion
on those financial statements.
Our firm has also provided other services to the Group in relation to transfer pricing tax advice and scrutineering at
the Group’s Annual Meeting of shareholders. Subject to certain restrictions, partners and employees of our firm
may also deal with the Group on normal terms within the ordinary course of trading activities of the business of the
Group. These matters have not impaired our independence as auditors of the Group. The firm has no other
relationship with, or interest in, the Group.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that these condensed
consolidated interim financial statements of Cavalier Corporation Limited do not present fairly, in all material
respects, the financial position of the Group as at 31 December 2016, and of its financial performance and its cash
flows for the six months ended on that date, in accordance with NZ IAS 34 Interim Financial Reporting.

16 February 2017
Auckland

6
Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Income Statement


Six months ended 31 December 2016 (Unaudited)

Notes Unaudited
Six months
ended
31 Dec 2016
Unaudited
Six months
ended
31 Dec 2015
$000 $000


Revenue 5 84,278 98,422
Cost of sales (67,951) (76,555)

Gross profit 16,327 21,867

Other income and gains 6 16 4,327
Distribution expenses (13,978) (14,413)
Administration expenses (3,547) (3,200)
Restructuring costs (3,989) (969)
Reversal of impairment of fixed assets 1,442 -

Results from operating activities (3,729) 7,612

Net finance costs (1,489) (1,961)

Share of profit of equity-accounted investee (net of tax) 4 65 724
Gain on merger and dilution of equity-accounted investee 4 3,763 -

Profit/(Loss) before tax 7 (1,390) 6,375

Tax (expense)/credit 1,421 (2,860)

Profit after tax for the period $31 $3,515

Profit after tax attributable to:
Shareholders of Cavalier Corporation Limited 31 3,515
Non-controlling interests - -

Profit after tax for the period $31 $3,515

Basic and diluted earnings per share (cents) - 5.1

Weighted average number of shares outstanding during
the period (000s)



68,679

68,679




















This statement is to be read in conjunction with the Notes on pages 13 to 17 and the previous year’s annual
financial statements.

7
Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Comprehensive Income


Six months ended 31 December 2016 (Unaudited)

Note Unaudited
Six months
ended
31 Dec 2016
Unaudited
Six months
ended
31 Dec 2015
$000 $000


Profit after tax for the period 31 3,515

Other comprehensive income that may be reclassified
subsequently to profit or loss


Effective portion of changes in fair value of cash flow hedges 846 1,095
Net change in fair value of cash flow hedges transferred to profit
or loss



121

(156)
Tax on other comprehensive income (271) (263)
Share of fair value of cash flow hedges (net of tax) of equity-
accounted investee

4

(82)

-
Foreign currency translation differences for foreign operations (27) (89)
587 587

Other comprehensive income not reclassified subsequently
to profit or loss

-

-

Other comprehensive income for the period, net of tax 587 587

Total comprehensive income for the period $618 $4,102

Total comprehensive income attributable to:
Shareholders of Cavalier Corporation Limited 618 4,102
Non-controlling interests - -

Total comprehensive income for the period $618 $4,102




























This statement is to be read in conjunction with the Notes on pages 13 to 17 and the previous year’s annual
financial statements.

8
Cavalier Corporation Limited and subsidiary companies Condensed Consolidated Statement of Changes in Equity
Six months ended 31 December 2016 (Unaudited)


Share
Capital
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Retained
Earnings
Total Equity


$000
$000
$000

$000

$000














Total equity at beginning of the period

$21,846
$(969)
$(1,425)
$49,909
$69,361







Total comprehensive income for the period













Profit after tax

-
-
-
31
31







Other comprehensive income that may be reclassified subsequently to profit or loss






Changes in fair value of cash flow hedges (net of tax)

-
696
-
-
696
Share of fair value of cash flow hedges (net of tax) of equity-accounted investee


-

(82)



(82)
Foreign currency translation differences for foreign operations


-
-
(27)
-
(27)









-
614
(27)
-
587







Other comprehensive income not reclassified subsequently to profit or loss


-

-

-

-

-







Total other comprehensive income

-
614
(27)
-
587







Total comprehensive income for the period

-
614
(27)
31
618














Transactions with owners, recorded directly in equity

-
-
-
-
-







Total equity at end of the period

$21,846
$(355)
$(1,452)
$49,940
$69,979
This statement is to be read in conjunction with the Notes on p
ages 13 to 17
and the previous year’s annual financial statements.

9
Cavalier Corporation Limited and subsidiary companies Condensed Consolidated Statement of Changes in Equity (continue
d)

Six months ended 31 December 2015 (Unaudited)


Share
Capital
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Share Rights
Reserve
Retained
Earnings
Total Equity


$000
$000
$000

$000

$000

$000
















Total equity at beginning of the period

$21,846
$(1,171)
$(1,285)
$1,448
$45,346
$66,184








Total comprehensive income for the period















Profit after tax

-
-
-
-
3,515
3,515








Other comprehensive income that may be reclassified subsequently to profit or loss







Changes in fair value of cash flow hedges (net of tax)

-
676
-
-
-
676
Foreign currency translation differences for foreign operations


-
-
(89)
-
-
(89)










-
676
(89)
-
-
587








Other comprehensive income not reclassified subsequently to profit or loss







Changes in amounts payable to non-controlling interests

-
-
-
-
-
-








Total other comprehensive income

-
676
(89)
-
-
587








Total comprehensive income for the period

-
676
(89)
-
3,515
4,102
















Transactions with owners, recorded directly in equity

-
-
-
-
-
-








Total equity at end of the period

$21,846
$(495)
$(1,374)
$1,448
$48,861
$70,286
This statement is to be read in conjunction with the Notes on p
ages 13 to 17
and the previous year’s annual financial statements.

10
Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Financial Position


As at 31 December 2016 (Unaudited)
Note Unaudited
31 Dec 2016
Audited
30 June 2016
$000 $000

ASSETS

Property, plant and equipment 37,705 36,820
Intangible assets 2,362 2,362
Investment in equity-accounted investees 4 23,671 23,175
Deferred tax asset 2,236 3,496

Total non-current assets 65,974 65,853

Cash and cash equivalents 689 1,200
Trade receivables, other receivables and prepayments 19,189 21,723
Receivable from equity-accounted investee 4 3,250 -
Inventories 49,204 57,733
Derivative financial instruments 754 867
Tax receivable 2,446 -

Total current assets 75,532 81,523

Total assets $141,506 $147,376

EQUITY

Share capital 21,846 21,846
Cash flow hedging reserve (355) (969)
Foreign currency translation reserve (1,452) (1,425)
Retained earnings 49,940 49,909

Total equity attributable to equity holders of the Company 69,979 69,361

LIABILITIES

Loans and borrowings 43,050 37,700
Employee benefits 1,261 1,237
Deferred income 55 84
Provisions 2,845 3,140

Total non-current liabilities 47,211 42,161

Trade creditors and accruals 17,774 22,779
Provisions 2,068 4,060
Employee entitlements 3,345 4,370
Deferred income 67 67
Derivative financial instruments 1,062 2,132
Tax payable - 2,446

Total current liabilities 24,316 35,854

Total liabilities 71,527 78,015

Total equity and liabilities $141,506 $147,376








This statement is to be read in conjunction with the Notes on pages 13 to 17 and the previous year’s annual
financial statements.

11
Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Cash Flows


Six months ended 31 December 2016 (Unaudited)

Unaudited
Six months
ended
31 Dec 2016
Unaudited
Six months
ended
31 Dec 2015
$000 $000

CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 86,336 106,288
Cash paid to suppliers and employees (87,590) (99,356)

(1,254) 6,932
Dividends received 1 2
Other receipts 12 12
GST refunded 376 860
Interest paid (1,442) (1,897)
Income tax paid (2,482) (248)

Net cash flow from operating activities (4,789) 5,661


CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 56 11,355
Proceeds from sale of Ontera tile business - 1,798
Acquisition of property, plant and equipment (1,176) (892)
Purchase consideration of non-controlling interests - (91)
Dividends received from equity-accounted investee - 3,250

Net cash flow from investing activities (1,120) 15,420


CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(Decrease) in bank loans and borrowings 5,350 (21,245)

Net cash flow from financing activities 5,350 (21,245)


NET DECREASE IN CASH AND CASH EQUIVALENTS (559) (164)

Cash and cash equivalents at beginning of the period 1,200 2,834

Effect of exchange rate changes on cash 48 (120)

CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD



$689

$2,550

















This statement is to be read in conjunction with the Notes on pages 13 to 17 and the previous year’s annual
financial statements.

12
Cavalier Corporation Limited and subsidiary companies

Condensed Consolidated Statement of Cash Flows (continued)


Reconciliation of profit with net cash flow from operating activities

Six months ended 31 December 2016 (Unaudited)

Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2015

$000 $000



Profit after tax for the period 31
3,515



Add/(Deduct) non-cash and other items:

Depreciation
1,680
1,825
Share of profit of equity-accounted investee
(65)
(724)
Gain on merger and dilution of equity-accounted investee
(3,763)
-
Reversal of impairment of fixed assets
(1,442)
-
Deferred tax asset
989
(139)
Employee benefits
24
(23)
Deferred income
(29)
(31)
Provisions
(2,212)
(34)
Net gain on sale of property, plant and equipment
(3)
(4,313)
Net (gain)/loss on foreign currency balance
(45)
83



Changes in working capital items:

Trade and other receivables and prepayments
2,460
8,616
Inventories
8,529
(2,238)
Tax receivable/payable
(4,892)
2,751
Trade creditors and accruals
(6,061)
(3,932)
Derivative financial instruments
10
305



Net cash flow from operating activities $(4,789)
$5,661




























This statement is to be read in conjunction with the Notes on pages 13 to 17 and the previous year’s annual
financial statements.

13
Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements
For the six months ended 31 December 2016


1. General

Cavalier Corporation Limited (“Cavalier” or “the Company”) is a limited liability company that is domiciled
and incorporated in New Zealand.

The financial statements presented are for Cavalier and its subsidiaries (“the Group”) and the Group’s
investment in equity-accounted investees as at, and for the six months ended, 31 December 2016.

The Company is registered under the Companies Act 1993 and is an FMC reporting entity for the purposes
of the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013. The financial statements
have been prepared in accordance with these Acts.

The principal activities of the Group comprise carpet sales and manufacturing and wool procurement.
Following the consolidation of the Group’s yarn spinning operations during the period ended 31 December
2016, the Radford Yarn Technologies operation is now treated as a part of the carpet business and is
accordingly reported under the carpets segment.

All Group subsidiaries are wholly-owned.

The Group also has a 27.5% interest in commission woolscourer, Cavalier Wool Holdings Limited, and a
50% interest in asset-owning entity, CWS Assets Limited.

The Company is listed on the New Zealand Exchange and is required to comply with the provisions of the
NZX Main Board Listing Rules which require it to present half-yearly reports incorporating, amongst other
things, the interim financial statements covering the Group.

The interim financial statements contained in this half-yearly report were approved for issue by the Board of
Directors of the Company on 16 February 2017.

These interim financial statements are presented in New Zealand dollars ($), which is the Company’s
functional currency. Unless otherwise indicated, all financial information presented in New Zealand dollars
has been rounded to the nearest thousand.

The interim financial statements are condensed financial statements that have been prepared in
accordance with NZ IAS 34 Interim Financial Reporting. The disclosures normally required by other
standards within New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) to be
included in a complete set of annual financial statements are not required to be incorporated into a
condensed set of interim financial statements prepared under NZ IAS 34. As a consequence, the interim
financial statements do not comply with NZ IFRS.

The interim financial statements, and the comparative information for the six months ended 31 December
2015, are unaudited. The comparative information as at 30 June 2016 is audited.

2. Accounting policies

The accounting policies adopted in the preparation of the interim financial statements are consistent with
those adopted in the preparation of the annual financial statements for the year ended 30 June 2016. The
interim financial statements should therefore be read in conjunction with those annual financial statements
and the accounting policies set out therein.

14
Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)


3. Segment performance

Unaudited Carpets Wool Acquisition Total

Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2015
Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2015
Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2015
Restated Restated
$000 $000 $000 $000 $000 $000
External revenue 71,238 80,763 13,040 17,659 84,278 98,422
Inter-segment revenue - - 2,530 4,314 2,530 4,314
Total revenue $71,238 $80,763 $15,570 $21,973 86,808 102,736

Elimination of inter-segment revenue (2,530) (4,314)
Consolidated revenue $84,278 $98,422

Segment result before depreciation
and restructuring costs and gain on
sale of property


954


5,997


344


790


1,298


6,787
Depreciation (1,620) (1,771) (60) (54) (1,680) (1,825)
Segment result before restructuring
costs and gain on sale of property

(666)

4,226

284

736

(382)

4,962
Restructuring costs (3,989) (969) - - (3,989) (969)
Gain on sale of property - 4,313 - - - 4,313
Reversal of impairment of fixed assets 1,442 - - - 1,442 -
Segment result after restructuring
costs

(3,213)

7,570

284

736

(2,929)

8,306

Elimination of inter-segment profits - (44)
Unallocated corporate costs (800) (650)
Results from operating activities (3,729) 7,612

Net finance costs (1,489) (1,961)

Share of profit of equity-accounted
investee (net of tax)

65

724
Gain on merger and dilution of equity-
accounted investee

3,763

-
Profit/(Loss) before tax (1,390) 6,375

Tax (expense)/credit 1,421 (2,860)
Profit after tax for the period $31 $3,515

Employee numbers
Operations 480 522 29 32 509 554
Unallocated 4 4
Total 513 558

Capital expenditure 1,052 816 124 76 $1,176 $892


Carpets Wool Acquisition Total

Unaudited
As at
31 Dec 2016
Audited
As at
30 Jun 2016
Unaudited
As at
31 Dec 2016
Audited
As at
30 Jun 2016
Unaudited
As at
31 Dec 2016
Audited
As at
30 Jun 2016
Restated
$000 $000 $000 $000 $000 $000
Reportable segment assets 115,052 120,229 2,783 3,972 117,835 124,201
Investment in equity-accounted
investees

23,671

23,175
Total assets $141,506 $147,376

Reportable segment liabilities 26,672 37,450 1,805 2,865 28,477 40,315
Unallocated liabilities 43,050 37,700
Total liabilities $71,527 $78,015

15
Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)


3. Segment performance (continued)




The Group’s reportable segments are:
x carpets, which comprises the sales and manufacturing of carpets and the felted yarn spinning
activities previously reported under Radford Yarn Technologies (hence the comparatives are marked
as “Restated” where relevant); and
x wool acquisition.




Inter-segment transactions






All inter-segmental sales are at market prices. Inter-segmental sales during the period and
intercompany profits on stocks at balance date are eliminated on consolidation.




Information about geographical areas






In presenting information on the basis of geographical areas, revenue is based on the
geographical location of customers and non
-current assets are based on the geographical
location of those assets.




Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2015

$000 $000

Revenue



New Zealand
47,138
51,803
Australia
32,392
42,108
Rest of the world
4,748
4,511




$84,278
$98,422




As at
31 Dec 2016
As at
30 June 2016

$000 $000

Non-current assets



New Zealand
63,623
63,421
Australia
2,351
2,432




$65,974
$65,853




Information about major customers







None of the Group’s customers are major customers as defined in NZ IFRS 8 Operating
Segments
. Major customers are those external customers where revenues from
transactions with the Group are equal to, or exceed, 10% of the Group’s total revenues.

16
Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)


4. Equity-accounted investees




The Group’s equity-accounted investee, Cavalier Wool Holdings Limited (CWH), acquired Whakatu
Wool Scour Limited and Kaputone Wool Scour (1994) Limited from New Zealand Wool Services
International Limited (NZWSI) effective 31 December 2016 as part of the merger of CWH and the
woolscouring operations of NZWSI. Part of the consideration for the purchase of the two entities
involved the issue of new shares by CWH to NZWSI, diluting the Group’s interest in CWH from 50% to
27.5% as at that date.

In accounting for the dilution of the Group’s interest in CWH as at 31 December 2016, the Group
recognised a gain of $3,763,000, being the difference between the carrying amount of the investment in
CWH immediately before and after the merger transaction that led to the dilution of its interest in CWH.

CWH declared, in the lead-up to the effective date of the merger, a cash dividend of $6.5 million which
was paid on 20 January 2017. The Group’s share of this dividend of $3.25 million was recorded as a
receivable from equity-accounted investee at balance date.

CWH also declared, at the same time, a distribution in specie of shares with a fair value of $3.4 million
in CWS Assets Limited (CWSA) to the CWH shareholders, effectively reducing the carrying value of the
Group’s investment in CWH by $1.7 million while increasing the carrying value of the Group’s
investment in CWSA by the same amount.

The details relating to the Group’s interest in equity-accounted investees are set out below:





Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2015

$000 $000
Carrying value as at 1 July
23,175
24,937
Share of profit after tax
65
724
Share of changes in fair value of cash flow
hedges (net of tax)


(82)

-
Dividends received
(3,250)
(3,250)
Dividend in specie received
(1,700)
-
Carrying value of CWSA
1,700
-
Gain on merger and dilution
3,763
-
Carry value as at 31 December
$23,671
$22,411




5. Revenue




Sales of goods
84,132
98,321
Provision of installation services
146
101
Total revenue
$84,278
$98,422




6. Other Income and gains




Rentals received
12
12
Dividends received
1
2
Net gain on disposal of property, plant and
equipment
3
4,313
Total other income and gains
$16
$4,327

17
Cavalier Corporation Limited and subsidiary companies

Notes to the Financial Statements (continued)


7. Loans and borrowings


It is the considered view of the Directors that no material uncertainty exists in the Group’s ability to
deliver on its profit improvement programme. The realisation of gains expected from the Group’s
reinvestment in the core business has taken longer than expected and consequently, the Company
revised its banking covenants to reflect this.





Six months
ended
31 Dec 2016
Six months
ended
31 Dec 2015

$000 $000
8. Expenses





Profit/(Loss) before tax includes the following:




Depreciation
$1,680
$1,825
Operating lease and rental costs
$1,916
$2,077


As at
31 Dec 2016
As at
30 June 2016

$000 $000



9. Capital expenditure commitments






Capital expenditure commitments
-
$12

10. Contingent liabilities






Bank guarantees in respect of operating leases
and other commitments



$1,347

$1,335

11. Related party transactions







Equity-accounted investee
C
avalier Wool Holdings Limited (CWH), the Group’s equity-accounted investee, provides the
Group’s carpet operations with wool scouring services, whether directly or through wool
exporters from whom the Group purchases most of its wool.


The value of services contracted directly with CWH during
the six months ended 31 December
201
6 was $249,000 (six months ended 31 December 2015 $370,000).

Dividends declared by CWH during the six months ended 31 December 2016 are disclosed in
N
ote 4. Dividends totaling $3,250,000 were received from CWH during the six months ended
31 December 2015.

18
Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information
For the six months ended 31 December 2016


The half year report for the six months ended 31 December 2016 contains financial information that is non-GAAP
(Generally Accepted Accounting Practice) and therefore falls within the Financial Markets Authority’s guidance note
on “Disclosing non-GAAP financial information” issued in September 2012.

Non-GAAP financial information has been prepared using the unaudited GAAP-compliant half year and audited
GAAP-compliant full year financial statements of the Group.

Non-GAAP financial information contained within the half year report (more particularly, the non-GAAP measures
of financial performance such as “EBITDA (normalised)”, “EBIT (normalised)”, “Profit before tax (normalised)” and
“Profit after tax (normalised)” provide useful information to investors regarding the performance of the Group
because the calculations exclude restructuring costs and other gains/losses (for example, gain on sale of property)
that are not expected to occur on a regular basis either by virtue of quantum or nature.

In arriving at this view, the Directors have also taken cognisance of the regular requests by users of the Group
financial statements, including analysts and shareholders, regarding the nature and quantum of significant items
within the GAAP-compliant results and the way analysts distinguish between GAAP and non-GAAP measures of
profit.

The disclosure of the non-GAAP financial information is also consistent with how the financial information for the
Group is reported internally, and reviewed by the Chief Executive Officer as its chief operating decision maker, and
provides what the Directors and management believe gives a more meaningful insight into the underlying financial
performance of the Group and a better understanding of how the Group is tracking after taking into account these
significant items.

In putting together the half year report, the Directors have taken into account all of the requirements within the
guidance note. More specifically, these include:

x outlining why non-GAAP financial information is useful;
x ensuring that:
- no undue prominence, emphasis or authority is given to any non-GAAP financial information;
- non-GAAP financial information is appropriately labelled;
- the calculation of non-GAAP financial information is clearly explained; and
- a reconciliation between non-GAAP and GAAP financial information is provided (see below);
x applying a consistent approach from period to period and ensuring that comparatives are similarly adjusted
for consistency;
x ensuring that non-GAAP financial information is unbiased and taking care when describing, or referring to,
items as ‘one-off’ or ‘non-recurring’; and
x identifying the source of non-GAAP financial information

19
Cavalier Corporation Limited and subsidiary companies

Disclosure of Non-GAAP Financial Information (continued)


Reconciliation of GAAP-compliant to non GAAP-compliant measures of profit/(loss) after tax

Six months ended 31 Dec 2016

GAAP Adjustments Normalised
$000 $000 $000

Revenue $84,278 - $84,278

EBITDA (2,049) 2,546
1
497

Depreciation (1,680) - (1,680)

EBIT

(3,729) 2,546 (1,183)

Net interest expense (1,489) - (1,489)

Share of profit after tax of equity-accounted investee 65 23

88
Gain on merger and dilution of equity-accounted investee 3,763 (3,763)

-

Loss before tax (1,390) (1,194) (2,584)

Tax credit 1,421 (713)
2
708

Profit/(Loss) after tax $31 (1,907) (1,876)

Abnormal net gains after tax 1,907 1,907

Profit after tax (GAAP) - $31

Analysis of reversals

Loss before
tax
Tax effect Loss after
tax
$000 $000 $000
Restructuring costs
1, 2
$(2,546) $713 $(1,833)

20
Cavalier Corporation Limited

Corporate Directory


Board of Directors:
Grant Biel B.E. (Mech.) Member of Audit, Remuneration and Nomination
Non-independent Committees

Steve Bootten ACA, FCIS, FCIM, MInstD Chairman of Audit Committee
Independent Member of Remuneration and Nomination Committees

Sarah Haydon B.Sc., FCA, CMInstD Chairman of the Board of Directors
Independent Chairman of Nomination Committee
Member of Audit and Remuneration Committees

Dianne McAteer B.Com., MBA, CMInstD Member of Audit, Remuneration and Nomination
Independent Committees

John Rae B.Com., LLB, CMInstD Deputy Chairman of the Board of Directors
Independent Chairman of Remuneration Committee
Member of Audit and Nomination Committees

Chief Executive Officer:
Paul Alston BBS, CA

Company Secretary:
Victor Tan CA, FCIS

Founding Shareholder:
The late Anthony Charles Timpson ONZM

Registered Office:
7 Grayson Avenue, Auckland 2014, P O Box 97-040, Auckland 2241.
Telephone: 64-9-277 6000, Facsimile: 64-9-279 4756

Share Registrar:
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road, Auckland 0622, Private Bag 92-119, Auckland 1142.
Telephone: 64-9-488 8700, Facsimile: 64-9-488 8787, Investor Enquiries: 64-9-488 8777

Auditors:
KPMG

Legal Advisors:
Russell McVeagh

Bankers:
Bank of New Zealand National Australia Bank Limited

Websites:
Corporate www.cavcorp.co.nz

Carpet Operation www.cavbrem.co.nz, www.cavbrem.com.au,
www.normanellison.co.nz, www.normanellison.com.au
www.radfordyarn.com

Wool Operation www.elcodirect.co.nz

Share Registrar www.computershare.co.nz/investorcentre